Perspectives

US Supreme Court hears oral arguments in Colorado remote seller notice case

Multistate tax alert | January 15, 2015

The US Supreme Court recently heard oral arguments in 'Direct Marketing Association v. Brohl'. The issue before the Court is whether the Tax Injunction Act bars federal court jurisdiction over the suit to enjoin the DOR from enforcing the remote seller notice and reporting law. It is important to note that the Direct Marketing Association (“DMA”) has also brought a separate action in Colorado state court. That court has granted DMA’s motion for a preliminary injunction, preventing Colorado from enforcing its remote seller use tax notice law. In this Tax Alert we summarize the parties’ arguments before the US Supreme Court and provide some taxpayer considerations.

Federal court jurisdiction ​of the Tax Injunction Act

The US Supreme Court recently heard oral arguments in Direct Marketing Association v. Brohl.1 The original issue in this case, litigated in Federal District Court, involved whether notice and reporting requirements under Colo. Rev. Stat. § 39-21-112(3.5) (applicable to retailers that do not collect Colorado sales tax) violated the Commerce Clause of the US Constitution. The District Court had previously granted a motion for summary judgment brought by the Direct Marketing Association (“DMA”) and issued a permanent injunction enjoining the Colorado Department of Revenue (“DOR”) from enforcing the remote seller notice and reporting law, holding that the law violated the Commerce Clause of the US Constitution.2 The District Court’s decision was subsequently reversed by the US Court of Appeals for the 10th Circuit, holding that under the Tax Injunction Act (“TIA”) (28 U.S.C. § 1341) the District Court lacked jurisdiction to issue a permanent injunction prohibiting enforcement of the law.3 The issue before the US Supreme Court is whether the TIA bars federal court jurisdiction over the suit to enjoin the DOR from enforcing the remote seller notice and reporting law. It is important to note that DMA has also brought a separate action in Colorado state court. That court has granted DMA’s motion for a preliminary injunction, preventing Colorado from enforcing its remote seller use tax notice law.

In this Tax Alert we summarize the parties’ arguments before the US Supreme Court and provide some taxpayer considerations.

1 Direct Mktg. Ass’n v. Brohl, 134 S. Ct. 2901 (U.S. 2014), cert. granted; argued Dec. 8, 2014.
2 Direct Mktg. Ass’n v. Huber, 2012 U.S. Dist. LEXIS 44468 (D. Colo. Mar. 30, 2012).
3 Direct Mktg. Ass’n v. Brohl, 735 F.3d 904 (10th Cir. Colo. 2013).

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